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On July 1, 2013, the exchange rate between the British Pound (GBP) and the US dollar (USD) was 1.5169 USD/GBP. Five months later, on December 1, 2013 the rate was 1.6383 USD/GBP.
1. Over this time period, did the dollar appreciate or depreciate against the pound? Explain.
2. Consider an American export good priced at $100 on both dates. What was the GBP price of the good on both dates?
3. Consider a British export good priced at 100GBP on both dates. What was the US dollar price of that good on both dates?
4. How is the change in the GBP/USD exchange rate likely to affect US exports? US imports? US Net Exports?
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